It is quite within the realms of possibility that the product and finance flow of managing raw material inventory can be completely removed until the client’s finished goods are sold."
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Indent Supply Change Management: Just in Case, JIC, Push System; Made to Stock
Until 1999, the JIC approach was common place in both New Zealand and Australia and it was how FTIS met its clients’ needs.
Indent supply chain management is a procurement tool used by the entrepreneurial buyer. The accepted protocol being to source the cheapest price per piece, regardless of MOQ (minimum order quantity), EOQ (economic order quantity) and freight cost.
It ignores supply chain principles of vendor management and total cost of once the inventory is on-hand. Whilst there is still a market for this, it’s primarily one time buys to meet short term needs- it does not provide stakeholders with certainty in the middle to long term.
Just in Time: JIT, Push – Pull System
After 1999, due to supply volumes and the changing nature of strategic relations with suppliers and customers to create value systems, FTIS moved closer to the customer.
Not just in terms of engineering support, but also in the use of JIT deliveries on a daily basis to provide a competitive edge in the market. This was achieved by locating logistics centres very close to the manufacturers. The first of these was the New Zealand operation, started in September 2000.
Because FTIS represents the client, not the supplier in sourcing materials for the client, this move had an almost instant downward effect on inventory levels and values.
We integrated FTIS Product Specialists and Supply Chain Managers with the client design engineers and procurement teams. The main purpose was to streamline customer relationship management with supplier relationship management processes and find synergies that formed the critical linkages in the supply chain.
Direct to Line: DTL, Push – Pull System
In 2002, we analysed whether or not JIT was meeting manufacturing clients’ requirements to reduce the cost of inventory.
We focused on:
- Our relationship with our clients: making sure they understood FTIS and we understood their manufacturing requirements and philosophies.
- Understanding the existing supply chains.
- Achieving a strategic fit.
The results gave us a roadmap for analysing current supply chains, especially to separate fact from fiction. Results challenged existing supply chain assumptions, and led to recommendations that would identify value.
Vendor Managed Inventory: VMI, Pull System; Made to Order
In 2004, FTIS set up another facility in Brisbane - Case Study 2. On completion of the JIT conversion with another manufacturing the client, we found inventory was reduced substantially.
We also found, due to the nature of the manufacturing requirements and its cellular network, moving to DTL straight away was not a practical solution. Instead, we believed value could be added through outsourcing, which involved the process of Vendor Managed Inventory. We felt while the risk of holding all inventory was very high, it would be offset by the strong strategic partnership approach.
In February 2008, the project was complete with similar gains achieved by the DTL approach, plus some important additions.
Based on our two case study successes, the parties have started work to reduce costs even further in the supply chai
VMI Supply Chain
2010 & Beyond
The Next Stage
There are still opportunities available to reduce costs further in the supply chain. With VMI to the production line, the value of the client Raw Material Inventory is $Zero. However, inventory is still being held by the client in Work In Process. The next step in our supply chain management is the management of the raw material inventory right through the manufacturing process until it becomes a finished product.
It is quite within the realms of possibility that the product and finance flow of managing raw material inventory is completely removed until the client’s finished goods are sold.
Overall Supply Chain Process
Product flow area of responsibility
Financial flow of responsibility
|Design-in||FT Group||FT Group|
|Sourcing product||FT Group||FT Group|
|Planning||FT Group||FT Group|
|Procurement||FT Group||FT Group|
|Losigistics||FT Group||FT Group|
|VMI in plant||FT Group||FT Group|
|Sell finished goods||Client||FT Group|
|Pay for raw material||FT Group||Client|